New Ideas in Retail

April 3, 2006
A report on the latest trends and new ideas for the retail sector, from the second annual Airport Revenue News conference.

LAS VEGAS — The ARN (Airport Revenue News) 2006 Airport Revenue Conference was held here in February. The three-day event featured educational courses and sessions designed for both retailers and airport professionals as well as exhibitor space. In speaking with attendees and exhibitors, it seems new, innovative ideas are they way airports will move forward with their retail programs. Here’s a recap of some of the sessions, along with news from airports and their tenants.

Dr. Patricia Ryan, manager, commercial operations for Miami-Dade Aviation Department, reminds airports that in the solicitation process for new retail operators, it’s important for the airport to do its research. Part of that research will involve talking to your current tenants.

Airports frequently don’t know as much as their business partners do, advises Ryan. Airports should analyze passenger surveys, as well as take the time to sit and watch customers. Look at the demographics and note the purchasing habits at the airport. Despite the fact that every business, location, and airport is different, it’s also important, says Ryan, to look around at other airports.

Kottayam V. Natarajan Jr., director for AvAirPros and former general manager aviation of business development for Seattle-Tacoma International, was involved in the redevelopment of that airport’s retail program. Some of the most important things for airports to keep in mind, according to Natarajan include: establish the basic parameters for the concessions program — will there be a master concessionaire? Separate vendors? What will the space layout be? What will the pricing policy and rent structure be? He suggests airports conduct a market survey to “find out what’s out there.” And, “at the end of the day, make sure everybody’s making money.”

Redesign Success at Memphis

Memphis International recently finished its terminal redesign project, which created new, inviting retail spaces reflective of Memphis’s rich music history and unique food.

The new concepts are based on some three years of surveys to determine what passengers wanted at Memphis, according to Richard White, properties director. Since opening, White says return on investment has been “tremendous.” In 2003, total revenue per passenger was $4.72; in 2005 that number was at $6.01, with the shops only being open less than six months. Adds White, “The next task is tweaking customer service.”

Street Pricing Debate Heats Things Up

Perhaps the most lively discussion came during a sessions entitled “Street Pricing Free for All” with airport and business owners expressing their opinions on this ever-present debate.

According to Andy Weddig, VP Unison-Maximus, a proponent of street pricing, 70 percent of domestic passengers expect higher prices for airport concessions. Surveys also show that: price is often rated as the “most important” factor to airport shoppers; price satisfaction leads to larger purchases; and, price dissatisfaction leads to wider dissatisfaction with a traveler’s entire airport experience — including security, check-in, airport facilities, etc.

Arlene Lewis, director of national development for Wendy’s International, says her company exists to run a business, take care of passengers, and make money, and street pricing policies at airports are not conducive to those things. She cites rent costs, labor costs, development costs, unions, airport employee discounts, limited lease space requiring off-site storage (“We’re given a shoe box to operate in,” she says), and the rising cost of goods as some of the reasons why doing business in an airport is more expensive, and thus requires her airport stores to charge more than at street locations to remain profitable.

Lewis does say that street pricing can work, “but there has to be give and take.” However, that would require airports to lower the minimum annual guarantee (MAG), extend lease terms to at least 10 years, and put a cap on CAM (common area maintenance) charges.